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The Effects of Conflicted Investment Advice on Retirement Savings

February 24, 2015 Comments off

The Effects of Conflicted Investment Advice on Retirement Savings (PDF)
Source: Council of Economic Advisors
From blog post (Whitehouse.gov):

Americans’ retirement income is derived from many sources, including Social Security, traditional pensions, employer-based retirement savings plans such as 401(k)s, and Individual Retirement Accounts (IRAs). While this landscape is familiar today, it reflects a dramatic change from the landscape 40 years ago. The share of working Americans covered by traditional pension plans—which offer a guaranteed income stream in retirement—has fallen sharply. Today, most workers participating in a retirement plan at work are covered by a defined contribution plan, such as a 401(k). Importantly, the income available in retirement from a defined contribution plan depends on both the amount initially saved and the return on those savings. The shift from traditional pensions to defined contribution plans raises important policy issues about investment responsibilities and the roles of individual households, employers, and investment advisers in ensuring the retirement security of Americans.

Defined contribution plans and IRAs are intricately linked, as the overwhelming majority of money flowing into IRAs comes from rollovers from an employer-based retirement plan, not direct IRA contributions. Collectively, more than 40 million American families have savings of more than $7 trillion in IRAs. More than 75 million families have an employer-based retirement plan, own an IRA, or both. Rollovers to IRAs exceeded $300 billion in 2012 and are expected to increase steadily in the coming years. The decision whether to roll over one’s assets into an IRA can be confusing and the set of financial products that can be held in an IRA is vast, including savings accounts, money market accounts, mutual funds, exchange-traded funds, individual stocks and bonds, and annuities. Selecting and managing IRA investments can be a challenging and time-consuming task, frequently one of the most complex financial decisions in a person’s life, and many Americans turn to professional advisers for assistance. However, financial advisers are often compensated through fees and commissions that depend on their clients’ actions. Such fee structures generate acute conflicts of interest: the best recommendation for the saver may not be the best recommendation for the adviser’s bottom line.

CEA’s new report The Effects of Conflicted Investment Advice on Retirement Savings examines the evidence on the cost of conflicted investment advice and its effects on Americans’ retirement savings, focusing on IRAs. Investment losses due to conflicted advice result from the incentives conflicted payments generate for financial advisers to steer savers into products or investment strategies that provide larger payments to the adviser but are not necessarily the best choice for the saver.

The 2015 Economic Report of the President

February 19, 2015 Comments off

The 2015 Economic Report of the President
Source: Council of Economic Advisers

This morning, the Council of Economic Advisers released the 69th-annual Economic Report of the President, which reviews the United States’ accelerating recovery and ways to further support middle-class families as the recovery continues. The economy is recovering from the Great Recession at an increasing pace, growing at an annual rate of 2.8 percent over the past two years, compared with 2.1 percent over the first three-and-a-half years of the recovery. The speed-up is especially clear in the labor market, where job gains have reached a pace not seen since the 1990s. But it is essential that a broad range of households benefit from the United States’ resurgent growth, so this year’s Report focuses on factors that are important to middle-class incomes: productivity, labor force participation, and income inequality. The President’s approach to economic policies, what he calls “middle-class economics,” aims to improve each of these long-standing elements and ensure that Americans of all income levels share in the accelerating recovery.

FACT SHEET: Progress in Our Ebola Response at Home and Abroad

February 13, 2015 Comments off

FACT SHEET: Progress in Our Ebola Response at Home and Abroad
Source: White House

Today, approximately 10 months since the first U.S. personnel deployed to West Africa to fight Ebola, we mark important milestones in our response to the epidemic and chart the way ahead. In keeping with the President’s charge that we tackle Ebola as a national security priority, we built, coordinated, and led an international response—involving thousands of personnel, both U.S. and international, civilian, and military—to fight the disease at its source. All the while, we enhanced our preparedness to encounter Ebola on our shores, establishing comprehensive measures to screen and detect the disease in travelers, while strengthening our capacity to diagnose, isolate, and treat any patients safely. This response showcased American leadership at its finest on the world stage, just as we came together as a nation to fortify our domestic resilience in the face of understandable apprehension. To be sure, our tasks are far from complete; we will keep working to meet this challenge until there are zero cases in West Africa and our domestic infrastructure is fully completed. Our focus now turns to consolidating that substantial progress as America today marks the next phase of our response.

Remarks by the President on Request to Congress for Authorization of Force Against ISIL

February 12, 2015 Comments off

Remarks by the President on Request to Congress for Authorization of Force Against ISIL
Source: White House

Today, my administration submitted a draft resolution to Congress to authorize the use of force against ISIL. I want to be very clear about what it does and what it does not do.

This resolution reflects our core objective to destroy ISIL. It supports the comprehensive strategy that we have been pursuing with our allies and partners: A systemic and sustained campaign of airstrikes against ISIL in Iraq and Syria. Support and training for local forces on the ground, including the moderate Syrian opposition. Preventing ISIL attacks, in the region and beyond, including by foreign terrorist fighters who try to threaten our countries. Regional and international support for an inclusive Iraqi government that unites the Iraqi people and strengthens Iraqi forces against ISIL. Humanitarian assistance for the innocent civilians of Iraq and Syria, who are suffering so terribly under ISIL’s reign of horror.

The resolution we’ve submitted today does not call for the deployment of U.S. ground combat forces to Iraq or Syria. It is not the authorization of another ground war, like Afghanistan or Iraq. The 2,600 American troops in Iraq today largely serve on bases — and, yes, they face the risks that come with service in any dangerous environment. But they do not have a combat mission. They are focused on training Iraqi forces, including Kurdish forces.

As I’ve said before, I’m convinced that the United States should not get dragged back into another prolonged ground war in the Middle East. That’s not in our national security interest and it’s not necessary for us to defeat ISIL. Local forces on the ground who know their countries best are best positioned to take the ground fight to ISIL — and that’s what they’re doing.

White House — The Economics of Big Data and Differential Pricing

February 10, 2015 Comments off

The Economics of Big Data and Differential Pricing
Source: White House

This morning, the White House released an update to the big data working group’s May 2014 report on big data, describing progress in implementing the working group’s recommendations throughout the government. As part of that process, the Council of Economic Advisers released a new study on big data and differential pricing.

Differential pricing is the practice of charging different prices to different customers. Economic textbooks typically refer to this as “price discrimination.” Everyday examples include discounts for senior citizens at the movie-theater and higher priced tickets for last minute business travelers.

Economists have studied differential pricing for many years, and while big data seems poised to revolutionize pricing in practice, it has not altered the underlying principles. Perhaps surprisingly, those principles suggest that differential pricing is often good for both firms and their customers. When prices reflect a buyer’s ability to pay, sellers can often serve customers who would otherwise get priced out of the market, as with need-based financial aid for college students. Price differences can also reflect the cost or risk of serving different customers, which can discourage inappropriate risk-taking and expand the size of the market.

The benefits of differential pricing indicate that it can play an important positive role in the overall economy. However, our report also explains how discriminatory pricing can pose difficult trade-offs and present serious concerns about fairness, especially when consumers are unaware of how sellers are using information about them, or when pricing is based on factors outside of individuals’ control. One way to limit to unfair or inaccurate applications of big data in this context is to give consumers increased visibility into the types of information that companies collect, and more control over how it is used, as proposed in the President’s Consumer Privacy Bill of Rights.

National Security Strategy 2015

February 9, 2015 Comments off

National Security Strategy 2015 (PDF)
Source: White House

This strategy builds on the progress of the last 6 years, in which our active leadership has helped the world recover from a global economic crisis and respond to an array of emerging challenges. Our progress includes strengthening an unrivaled alliance system, underpinned by our enduring partnership with Europe, while investing in nascent multilateral forums like the G-20 and East Asia Summit. We brought most of our troops home after more than a decade of honorable service in two wars while adapting our counterterrorism strategy for an evolving terrorist threat. We led a multinational coalition to support the Afghan government to take responsibility for the security of their country, while supporting Afghanistan’s first peaceful, democratic transition of power. The United States led the international response to natural disasters, including the earthquake in Haiti, the earthquake and tsunami in Japan, and the typhoon in the Philippines to save lives, prevent greater damage, and support efforts to rebuild. We led international efforts to stop the proliferation of nuclear weapons, including by building an unprecedented international sanctions regime to hold Iran responsible for failing to meet its international obligations, while pursuing a diplomatic effort that has already stopped the progress of Iran’s nuclear program and rolled it back in key respects. We are rebalancing toward Asia and the Pacific while seeking new opportunities for partnership and investment in Africa and the Americas, where we have spurred greater agriculture and energy-related investments than ever before. And at home and abroad, we are taking concerted action to confront the dangers posed by climate change and to strengthen our energy security.

Still, there is no shortage of challenges that demand continued American leadership. The potential proliferation of weapons of mass destruction, particularly nuclear weapons, poses a grave risk. Even as we have decimated al-Qa’ida’s core leadership, more diffuse networks of al-Qa’ida, ISIL, and affiliated groups threaten U.S. citizens, interests, allies, and partners. Violent extremists exploit upheaval across the Middle East and North Africa. Fragile and conflict-affected states incubate and spawn infectious disease, illicit weapons and drug smugglers, and destabilizing refugee flows

See also: Fact Sheet: The 2015 National Security Strategy

Recruiting, Hiring, Retaining, and Promoting People With Disabilities: A Resource Guide for Employers

February 9, 2015 Comments off

Recruiting, Hiring, Retaining, and Promoting People With Disabilities: A Resource Guide for Employers (PDF)
Source: White House
To change the economic landscape for people with disabilities, private sector employers need to act as Disability Employment Champions. Employers who have made this commitment are reaping innumerable benefits. Employees with disabilities can help businesses understand and meet the needs of an important and expanding customer base of people with disabilities and their families. What’s more, research shows that consumers both with and without disabilities favor businesses that employ people with disabilities, and that people with disabilities can provide businesses with the flexible, innovative thinking required for a competitive edge in the 21st century.

The goal of the Curb Cuts to the Middle Class Initiative – a federal cross agency initiative – is to coordinate and leverage existing resources to increase employment opportunities for people with disabilities. This resource guide is an example of federal agencies working together to ensure employers have the tools and resources they need to recruit, hire, retain, and promote people with disabilities.

See also: Campaign for Disability Employment (U.S. Department of Labor)

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